Those darn hedge fund managers are geniuses.
For the last decade or so, the smartest of the bunch have been cutting checks to credit card companies and their data managers.
It was a good deal.
The banks get easy money… and the hedge funds learn what Americans are buying before the payment even clears.
It’s a smart way for savvy investors to track corporate revenues in real time – never mind the obvious (and dangerous) privacy concerns.
But on November 21, the opportunity got even bigger and one of the hottest sectors of the year just got a whole lot hotter.
If you’re a Manward Letter subscriber, our apologies if you’ve heard this before. We’ve been licking our greedy chops over this oddball sector for a while – even before this latest news.
But like we said, something big just happened… and we’d bet our favorite hat that you haven’t heard about it.
It concerns your money and your privacy – and the two don’t play nicely.
You see, in late November, Wells Fargo joined a host of other banks that are using the data they receive about customer transactions to offer customized ads.
In other words, the next time you log on to your bank’s website, don’t be surprised to see a push for the places you shop.
Going to Starbucks a lot? Your bank knows.
Book airfare to Paris? You’ll soon see ads for your favorite crêpe shop.
And your neighbor had better hope he didn’t use his bank card at a seedy gentleman’s club… because his other half may soon see some odd teases on her screen.
The idea of a bank trolling through our purchases and using them to entice us to spend more money used to be unthinkable. We’ve seen folks compare our relationship with a bank to that of a shrink or priest… Our secrets were safe.
But then came Google… and Facebook.
Both companies offer products that are a mere shill for their real offering… data. They use their products to mine lots and lots of data.
With plunging interest rates, fierce competition and the death of traditional banking practices, we aren’t surprised to see the same thing happening in the formerly secretive world of banking.
The Siren call of taking advantage of all that data is too much to resist.
It’s extremely lucrative.
The only question left for investors and consumers is… What’s next?
Hold Your Nose
Like we said at the top, banks have long been selling real-time access to the data that crosses their networks. But the data has been in batches and is far from individualized. In other words, you couldn’t take the data, see what your neighbor just bought and send him a targeted ad.
But there are growing hints that this anonymity will soon disappear.
Banks are quickly teaming up with data companies that make their living brokering individualized transactions. Wells Fargo’s move last month is surely the equivalent of the big bank dipping its toe into the water.
Once it feels the cool, refreshing wave of profit potential, it’ll surely hold its nose and dive in headfirst.
It could soon be a huge revenue source for banks and card processors. It could suddenly propel them into a business model that’s as lucrative as Facebook or Google’s data-centric strategy.
It begs a few deep thoughts.
The greedy ask how to get in on the action.
The privacy-minded ask how to opt the heck out of all this.
And the smartest among us scratch their heads and ponder if there’s a way to do both.
Fortunately… there is.
Get Out… Then Get In
Making money off all this is easy by buying shares of banks and credit card processors. Our paid subscribers have had a good year playing the trend. It’s been one of the hottest yet quietest sectors on all of Wall Street.
The privacy issue is a bit tougher.
Actually, it’s a lot tougher.
But before we get there, it’s important you know what’s at stake.
At first glance, it’s not all that bad.
Who cares if your bank knows you drink a lot of coffee and sends you coupons for Starbucks? It’s a win-win, right?
But what about when your car insurer buys access to the data and scans your charges? It might see all those trips to the gas station and assume you’re driving a whole lot more than your premium suggests.
Your bill could rise.
And we hope you don’t donate to the wrong political campaign…
Not to bring up old wounds from the Obama days, but it may trigger the IRS to take a deeper look at your taxes. And you’d better hope your bank records match your tax statement or the ensuing audit is going to hurt.
There are a couple ways out of this mess.
The first is to use cash. It’s untraceable. And it’s why the government and, now, banks are pressuring folks to ditch the stuff (some sinister news on that subject is here).
The second, and the most important, is to tell your bank you want nothing to do with this data monitoring. By law, they have to listen. Most folks have no idea their data is even being tracked… let alone that they can quickly log in to their account and opt out with the click of a mouse.
Here’s what it looks like on the Wells Fargo site:
Just click “No” and your data is off-limits.
But when it comes to investing in this trend, we hope you’re asking a deep question.
Why is this privacy-destroying trend something worth investing in? Shouldn’t we vote with our money and avoid companies that threaten our privacy?
It’s something we wrestle with a lot on this topic.
But there’s something to it that most folks never ponder… a critical reason you absolutely must become a shareholder.
We’ll dive into it on Monday.
Note: There’s a strong chance this trend will make headlines on December 11. That’s when a small group of powerful folks will meet in Washington to decide the fate of America’s No. 1 asset. Their decision could quickly accelerate this trend… and unleash an unprecedented situation. Click here to learn why we recently outlined a five-step “survival” plan.